April 1st, 2008
Many banks have suffered tremendous losses as a result of the subprime lending mess. Some are saying that the worst is over. Can that really be true already?
Read More >
February 21st, 2008
A recession economy doesn't have to destroy your financial security. In fact, sometimes a recession can help grow your financial security.
Read More >
February 17th, 2008
If you don't know what a recession is and how the very definition of one affects you, read here.
Read More >
February 16th, 2008
A short guide on what to think about the upcoming recession and how to keep your sanity intact until it is over.
Read More >
February 17th, 2008
With all this talk about recessions, one question that is seldom answered is what exactly constitutes a recession. This partly because no one really agrees on what the indicators of a recession are, or if it’s even possible to tell you’re in a recession until you’re far enough into one that it doesn’t matter.
The most widely accepted definition of a recession is six or more months of declining gross domestic product, aka six months of negative real economic growth. The real here indicates economic growth after taking into account inflation.
Given the difficulty and time needed to fully calculate the gross domestic product of a nation, it has hard to use this definition to plan ahead for a recession. It is also very hard to make a large media frenzy out of it. Some people define a recession to be when the National Bureau of Economic Research says there is a recession.
Since the NBER defines a recession as a very nebulous “significant” decline of economic activity across the economy, lasting for a few months or more, this definition is much easier to apply to the current economic situation without the need for truly in-depth studies of the economy or waiting 6 months for economic data. (see wikipedia)
What does this mean for you? For one, take any talk of already being in a recession with a grain of salt. This isn’t the only time people have been worried about a recession and it turned out to be a market correction. And even if we are in a recession, the best thing you can do is maintain a well diversified portfolio of stocks, bonds, commodities, and foreign investments like usual. By the time we know it’s a recession, we’re likely to already be back into period of market growth, and you’ll want to be in the position to take advantage of it.
If you enjoy our articles, please take time to subscribe to our weekly newsletter.
Privacy Policy
Copyright © 2008 Ideastone LLC